The effect of this has been to stifle transfers of Sipps in drawdown. As for existing investors, they are finding that their incomes have been reduced by up to 60 per cent at their next review date. Gad rates fell so far – as they are based on the rates for 15-year gilts – that they hit their record rock bottom of just 2 per cent.
But there is a silver lining for female drawdown clients. Historically, they have had to draw an income at a lower rate than men due to their longer life expectancy. However, with the introduction of the gender directive on 21 December 2012, the rate will be the same for both genders. This will potentially mean females can take a higher income, although they will still have to ensure they draw at a rate that will last through their retirement.
The gender directive is binding and will, hopefully, benefit some women. But all will still be affected by the lower 100 per cent limit.
Calls for reform of the income calculation for drawdown, or even a restoration of the higher 120 per cent income limit, have so far fallen on deaf ears, countered by those who believe drawdown poses too great a risk for the investor who will ultimately run out of income and need to fall back on the state. The alternative is that many investors are unable to draw sufficient levels out of their Sipp and spend it in a needy economy. The income they are unable to withdraw is left for their chosen beneficiaries – after HMRC has taken its 55 per cent share, of course.
But none of these factors truly answer the key question: why are so few women saving in Sipps and remaining invested through drawdown? It is likely a combination of factors, but providers and advisers should be looking at where it might be a suitable option and why so few opt for drawdown at present.
Drawdown is one area where gender equality has a way to go. Perhaps more women will ultimately feel more confident about keeping their Sipps long into drawdown if the regulator’s concerns are ironed out and the area is not regulated by arbitrary limits such as 100 per cent Gad.
Greg Kingston is head of marketing at Suffolk Life
